24 July, 2018

Discussion around plain packaging laws in relation to tobacco products has gone quite in recent times, and the slow movement towards more plain packaging laws hasn't helped this movement. Nevertheless, this blog has discussed the topic to some degree (more here, here and here), and one particular issue in the back burner has been a WTO challenge against the Australian plain packaging legislation. The matter started nearly 5 years ago, and only recently found its ultimate conclusion. The decision by the WTO panel is a behemoth at nearly 900 pages, so this blog post will endeavour to only focus on the main parts, rather than summarise the whole decision. For anyone wanting to know more, please refer to the full decision.

By way of a primer, the case of Australia v Indonesia and others concerned WTO proceedings with regards to the Australian Tobacco Plain Packaging Act 2011, which set certain rules on the packaging of tobacco products. According to Indonesia (and other countries such as Honduras, Cuba and the Dominican Republic) the law contravenes a number of WTO agreements, including the TRIPS Agreement, TBT Agreement and GATT 1994.

The panel first looked at whether the Australian Act contravened Article 2.2 of the TBT Agreement, which prohibits regulations that create unnecessary obstacles for trade that go beyond what's necessary to protect a legitimate objective, including "…protection of human health or safety, animal or plant life or health, or the environment". The panel concluded that the objective of protecting people's health by reducing smoking rates, as put forth by Australia, was a legitimate objective, and didn't restrict trade beyond achieving that legitimate objective (although did potentially restrict trade volumes). They made a 'meaningful contribution' to those ends, and the risk of the non-fulfilment of the objectives by declaring the measures unlawful under Article 2.2 would potentially have grave consequences.

Tobacco manufacturers yearn for the 'good old days'

In relation to the arguments under Article 15 of the TRIP Agreement, which prevents the prohibition of the registration of trademarks where the application of the mark would form an obstacle for registration of the mark. The panel rejected this argument, as the Act does not prevent the registration of marks, even if might impact the level of protection to those marks. They can be registered just as well, just not applied to tobacco products. In terms of Article 16.1 of the TRIPS Agreement, the panel saw that the reduced likelihood of confusion between brands was not an infringement of the article, as "…Article 16.1 does not require Members to refrain from regulatory measures that may affect the ability to maintain distinctiveness of individual trademarks or to provide a "minimum opportunity" to use a trademark to protect such distinctiveness". Article 16.1 is only concerned with the rights afforded to rightsholders relating to trademarks, and not their efficacy (or reduction thereof) through legislation. Rightholders still have the capability to prevent unauthorized use of identical or similar tobacco trademarks on identical or similar products where such use would result in a likelihood of confusion.

Similarly, the Panel saw that Article 16.3 was not infringed either (mandating the protection of 'well-known' trademarks), as the possibility of a reduced knowledge of previously well-known trademarks in the market does not, in itself, constitute a violation of Article 16.3. The panel emphasised that "…Article 16.3 does not require Members to refrain from taking measures that may affect the ability of right owners to maintain the well-known trademark status of individual trademarks, or to provide a "minimum opportunity" to use a trademark in the market".

The Panel then moved onto Article 20 of the TRIPS Agreement, which prevents the unjust encumbering of trademark use through special requirements. They ultimately concluded that Australia's public policy considerations offered an appropriate intervention in the use of tobacco related trademarks through special requirements, i.e. plain packaging. The Panel acknowledged the economic value in the trademarks themselves, but the efforts to curb smoking in Australia through plain packaging have had a genuine impact on smoking rates, and are therefore justifiable under Article 20.

Ultimately the panel saw no infringement of Australia's international obligations under the treaties, and allowed the law to stand.

The decision goes into great detail in many aspects of trade and international legislation surrounding trademarks – well beyond what this blog can, and should, discuss. The decision is hugely important, and will undoubtedly encourage other countries in their adoption of plain packaging measures. Honduras has already stated that they have appealed the decision, so the plain packaging saga will go on for a further number of years, due to the sheer value of the marks and brands at stake.

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The Author

Jani Ihalainen (LL.B. (Hons), LL.M.), is a law graduate with a passion for all that is intellectual property law, residing in London, UK.
He also currently works for an international law firm in the City of London.

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